Number of the Week: 107 Months to Clear Banks’ Housing Backlog

107: How many months it would take to sell banks’ current and shadow inventory of foreclosed homes.

Banks’ vast pile of foreclosed homes doesn’t appear to be diminishing. That’s a troubling sign for the future of the housing market.

Back in April, this column tallied up all the foreclosed homes sitting in banks’ inventory, as well as the “shadow” inventory of homes in the foreclosure process or on which owners had missed at least two mortgage payments. At the time, we reported that at the current rate of sales, it would take 103 months to unload it all.

Over the past six months, that number has actually risen. Banks managed to pare down the shadow inventory, but largely by taking possession of foreclosed homes. As of September, they owned nearly 994,000 foreclosed homes, up 21% from a year earlier. The shadow inventory stood at 5.2 million homes, down 7% from a year earlier. Grand total: 107 months of inventory.

The numbers aren’t exactly comparable to the April analysis, as the providers of data have changed. The inventory data now come from RealtyTrac, the shadow inventory data from LPS Applied Analytics, and the sales data from Core Logic. But no matter how you slice it, the housing market faces almost nine years of foreclosure hangover.

Over the summer, banks appeared to be making some headway. The government’s mortgage-modification program helped some people get current on their payments, taking their homes out of the foreclosure pipeline. At the same time, homebuyer tax credits helped boost sales. Combined real and shadow inventory fell to 91 months of sales in May.

Lately, though, a new wave of defaults appears to be coming in, in part related to the high rate of failures on government modifications. As of September, some 1.9 million homeowners had missed one payment on their mortgages, up 14% from March. Meanwhile, home sales have slowed sharply with the end of government stimulus.

Homeowners might reasonably hope that banks’ latest troubles with foreclosure paperwork might prop up prices by at least temporarily easing the flow of homes onto the market. So far, though, that doesn’t seem to be happening: According to housing-market consultancy Zelman & Associates, banks listed 15% more repossessed home in October than in September.

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